Maker eDollar

A global central bank for the digital economy

Maker A global central bank for the digital economy Maker is a reimplementation of the global credit system based on a new stable currency, the eDollar, a collateralized cryptocurrency pegged to the US dollar. Depositors gain value from the eDollar because it allows them to store their wealth in a system that not only keeps their monetary tokens completely under their control, but also provably keeps their purchasing power safe. The eDollar can be instantly sent and received from a computer or mobile device by the owner, using either the Ethereum blockchain, or spent as Bitcoin on the Bitcoin blockchain through a seamlessly integrated instant exchange. The eDollar buy side liquidity is guaranteed by Maker’s collateral, meaning that a depositor will be able to withdraw any amount of eDollar to other currencies at a fair rate, at all times. The eDollar also pays yield which amounts to half of the income earned from interest payments from Issuers. Issuers gain value from the eDollar because it allows them to borrow money using the same mechanism as depository institutions with traditional central banks, but in a direct, permissionless manner at the interest rate. The only requirement is that they post smart asset collateral with Maker to guarantee their debts. This allows cryptoasset margin traders, DAO’s, p2p lending networks and blockchain­listed companies or financial institutions to directly access the cheapest credit available in the digital economy without middlemen or fees. Maker gains value from the eDollar by earning half of the income from issuers in exchange for its service as the central bank, insurer of wealth and judge of creditworthiness on behalf of eDollar depositors. Makercoin, the tokens that enable voting on Makers monetary policy, are continously bought and burned automatically by Maker with the income earned from the interest, reducing the supply of makercoins and steadily increasing their value as long as there is activity in the eDollar economy.

How Maker and the eDollar works ● Maker is a set of smart contracts deployed on the Ethereum blockchain. ● Maker enables the issuance of eDollar against good collateral posted by Issuers on the Ethereum blockchain. This creates a collateralized debt position (CDP) that consists of the posted collateral, along with a debt that is equal to the amount of EUSD issued. The issued EUSD is instantly added to the Issuers balance. ● Good collateral is defined as blockchain assets that can be locked inside Makers Smart Asset Bank, which has very high collateral to debt ratio requirements to minimize the risk of default. Examples are Bitcoin, Ether, Makercoin, Augur Reputation and similar blockchain­based tokens, as well as IOU’s for commodities such as gold and other resources, as well as company stock and legal deeds with a proper regulatory framework. The default minimum collateral to debt ratio for issuance is 200%. ● Collateral types, collateral ratio requirements, margin call rates and debt ceilings are determined by Governors, one of the two types of delegates that are voted in by Makercoin holders. The Governors abilities to change these parameters are restricted within hard boundaries voted on by the Makercoin holders. ● The eDollar is a cryptocurrency that is pegged to the US dollar (peg rate: 1 EUSD = 1 USD). A pool of decentralized, independent price feeds from Augur and similar decentralized data feed services is the data source for the collateral prices and the status of the peg. ● Issuers must pay an interest rate on their debt, that varies daily depending on the status of the peg. ● The interest rate is manipulated to enforce the peg in the long run. If the independent price feeds determine that EUSD is valued above the peg, the interest rate decreases by 1 percent. If the independent price feeds determine that EUSD is valued below the peg, the interest rate increases by 1 percent. If the peg is holding, the governors can choose to modify the interest rate with up to 0.5 percent in either direction. This adjustment happens every 24 hours. ● The peg is defined as holding if the independent price feeds report a price between 99 and 101 US cents per EUSD. ● Half of the income from the interest payments are put in the Maker Vault, Makers eDollar account.

● The other half of the income from interest payments is put in the Yield Vault, from where they are distributed to eDollar holders at a yield rate that is 50% of the interest rate. ● Short run peg and liquidity of the eDollar is ensured by allowing Keepers, the second type of Maker delegate, to instantly liquidate any CDP by paying down its debt and receiving payment in its posted collateral at the peg rate, as determined by the independent price feeds. If a CDP has a collateralization ratio above the forced cover rate (defaults to 250%), it cannot be liquidated this way, except within the first 24 hours after issuance. ● If an Issuers CDP has its collateral to debt ratio fall too low, it becomes vulnerable to a hard margin call. Anyone can perform this hard margin call by paying down the debt of the CDP, and who in return will get the entire amount of the collateral. This heavily incentivizes the instant settlement of these low­collateral positions to reduce risk. The default value for the hard margin call rate is 140% collateral to debt. Keepers are tasked with forcing a CDP to cover before it hits the hard margin call rate, so they generally only happen in a crisis such as during a price crash of a collateral type. ● If a CDP becomes undercollateralized before it can be hard margin called, Maker is forced to perform a hard margin call with funds from the Maker Vault (a Maker call). The assets received from the Maker calls are put in the Maker Vault and auctioned off in bundles within one week. A Maker call can cause the eDollar balance of the Maker Vault to go negative. ● If the balance of the Maker Vault stays negative for more than a week, 1% of the total supply of Makercoin is inflated and put for an auction denominated in eDollar, with the proceeds going into the vault. This Makercoin inflation can happen at most once per week, and will continue until the Maker Vault balance becomes positive again. ● If the Maker Vault becomes excessively stocked with eDollar above the Stock Limit (defined as 1% of Makers market cap), these extra EUSD are put on a public auction for Makercoin that is then destroyed to reduce supply and transfer the wealth to the owners of Makercoin. This auction can happen at most once per week. ● All the actions of Maker, and the permissions of the Governors and the Keepers, are ultimately controlled by the holders of Makercoin through voting. To protect Depositors and Issuers, all Maker actions that change existing rules (for upgrade purposes) have a priming delay which means the action must be primed with a long delay before it can be triggered and executed, on the scale of months (growing over time to eventually become years). This ensures that Depositors and Issuers will have time to settle and leave the ecosystem if they disagree with an action.

● In the very long run, the eDollar will be decoupled from the US dollar and will instead be pegged to a basket of assets that represent global CPI with a yearly inflation target of 2%.